Sat, Jan 12, 2019 - Page 10 News List

Increased costs hit US retailers despite higher holiday sales


Holiday shopping reports released on Thursday underscored anew the challenges US retailers face in the Inc era — even if consumers are willing to open their wallets to spend.

The updates were a mixed bag overall, with several retailers reporting small or moderate increases in comparable store sales during the critical November to last month period, but a report from Macy’s Co aroused the most angst on Wall Street, after the retail chain slashed its profit forecast even as it signaled a modest increase in sales.

Macy’s shares plunged almost 20 percent, while nearly every major retailer was pulled down as well.

That included companies such as Target Corp that reported higher holiday sales and confirmed — but did not raise — profit forecasts.

The results were an ugly finale to a US holiday shopping season that opened with high expectations owing to robust consumer confidence amid a strong employment market, relatively low gasoline prices and a boost from tax cuts.

Mastercard SpendingPulse last month estimated holiday sales growth of about 5.1 percent to more than US$850 billion, the strongest jump in the past six years.

By that estimate, the holiday shopping season was a strong one — just not for retailers.

“It was a good season. Consumers had more money to spend. They spent it, but the cost of doing business is getting higher,” retail industry consultant Dana Telsey said.

The latest results suggested retailers still have not found a winning recipe for the transition to the e-commerce era, while experts say the industry is still undergoing an existential shakeout.

Companies such as Macy’s, JC Penney Co and Gap Inc have shuttered stores in recent years, while Toys “R” Us Inc went out of business completely — a fate that could also soon befall iconic US retailer Sears Holdings Corp.

Macy’s shares tumbled 18.7 percent after it reported an increase of 1.1 percent in comparable sales, but lowered its annual earnings forecast to a range of US$3.95 to US$4.00 a share from US$4.10 to US$4.30.

Sales were dented by a fire in a distribution center in West Virginia and a pre-Christmas “earn and redeem” promotional event that was unsuccessful, Macy’s said.

“The holiday season began strong, but weakened in the mid-December period and did not return to expected patterns until the week of Christmas,” Macy’s chief executive Jeff Gennette said.

Target said comparable sales grew 5.7 percent over the holiday, while Kohl’s Corp put sales growth at 1.2 percent.

L Brands Inc, the parent of Victoria’s Secret, reported flat comparable sales for the five weeks ending last Saturday.

Target shares fell 4.0 percent, Kohl’s shares dropped 7.1 percent and L Brands shares declined 7.6 percent.

Analysts said the declines were exacerbated by expectations that earnings growth would be tough this year after a strong last year following the US tax cut enacted in late 2017.

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